Banks sell the wealth of the people for profit
The International Monetary Fund is calling on the G20 governments to impose a new bank tax to help pay for the bailouts and deficits caused by the global financial crisis. Our Finance Minister Flaherty is rallying Canadians in support of the banks as though we should be defending against an assault on our national hockey team.
While Canadians might all agree that a tax on Canadian banks as suggested by the International Monetary Fund is unwarranted, let’s not kid ourselves into thinking that these massive public corporations shouldn’t pay their fair share in domestic tax. The banks are not benevolent citizens looking out for the welfare of average Canadians, although they spend millions in advertising each year to have you believe otherwise.
Canada’s big five banks, the Royal Bank, CIBC, Bank of Montreal, Scotiabank, and TD Canada Trust, are the largest corporations in Canada if one uses asset value as the measure. They control 70% of all our money on deposit in Canada. They determine 80% of small business lending and hold over 80% of the assets in the investment brokerage industry. They own all but two of the large trust companies and the majority of consumer credit and mortgage lending.
Like any corporation, management’s only concern is to provide a good return to their shareholders. But that is where the similarity with other corporations ends.
Most corporations are built upon a base of shareholder investment, but not our banks; they use your money. In fact, the hard earned money of over 20 million Canadians and the majority of Canadian businesses makes up 95% of the total capital base of the banks. Shareholder investment totals only 5%.
Ironically it is the fact that the banks control so much of your money and hold so much of your debt that has put them into the “too big to fail” category. So if poor business practice causes one or more of them to falter, your tax dollars will make them whole, but certainly not you. Even in good times, banks do little to help the average Canadian family or small and medium size business.
Consider that most of the consumer credit is owned by the banks, and then take a look at the interest rate they are charging on your credit card. Add that to the service fees they charge for virtually every transaction, and then try to secure a small business loan. In truth banks don’t lend you money, they sell you access to your money. The terms will always be in their favour, the price is a premium, and they take little or no risk. They certainly do not invest in you, your family, or your home or company despite what their advertising might say.
Canadian banks sell (lend) about $600 billion to businesses a year. Of that total, only 3% of loans go to small businesses that require loans under $100,000, and about 20% to medium size businesses with loans up to $5 million. The remaining 77% goes to big business in loans well over $5 million.
Ironically, much of the big business lending finances large international corporate enterprise outside of Canadian borders, and yet it is the small and medium-sized business sector that has created 90% of the jobs in Canada since 1983 and currently employs half of all working Canadians, who in turn put their hard earned money back into the bank and are paid peanuts in interest for this “privilege”.
Having myself served as a Provincial Finance Minister, I can understand why our federal Minister of Finance Jim Flaherty has been quick to rise to the defence of the banks stating, “We’re not going to punish our banks for the fact that they have acted responsibly,” but what I don’t understand is why he has not told Canadians that the banks have had the benefit of over $200-billion via a low-interest line of credit from Ottawa. Neither has he reminded us his Conservative government has gifted the banks over $4 billion in corporate tax reductions. Nor did he mention that any compliance the Canadian banks had with Canadian banking regulations was done reluctantly, with loud and frequent protests by our banks that they were overregulated and couldn’t compete with the other banks on a level playing field.
The Conservatives while in opposition supported the banks demands for deregulation to match that of the American banking system. Good thing the federal Liberals of the day didn’t listen!
Canada’s financial sector has averaged $50-billion a year in before-tax profits since 2005. Even during the 2009 recession, our banks and financial partners still racked up an impressive $44-billion in profits. Incredibly, during 2009, a year with record personal and small business bankruptcies, rising unemployment and numerous home foreclosures, the financial sector, which employs just 6% of Canadian workers, managed to earn profits of over 25%.
So while I might agree that the IMF has no business telling Canadian banks that they need to pay into an international fund for bank bailouts, Canadians should become increasingly aware of the huge profits that are being made by these institutions with every uptick in both privately and publicly held debt.
Canadian banks are uniquely positioned to be profitable and hold protected status within our economy. They didn’t survive 2009 simply through sound management, but did so hand in hand with the Bank of Canada and the federal government.
Finance ministers are uniquely positioned to set a new economic course, and Mr. Flaherty has been handed a golden opportunity to do so now that he has the banks’ attention. It seems to me that the compassion that Mr. Flaherty has for the Canadian banks is misplaced. What he should do is recognize that it is the hard work of the Canadian people that has built these institutions, and protect the people from usury as applied to credit card interest rates by capping the upper limit. He should compel the banks to lend to small and medium sized business at affordable rates, and have a compulsory public audit of accounts to make sure that they are doing so.
Banks sell the wealth of the people for profit. Mr. Flaherty should make sure that a fair percentage of those profits come home to benefit the people who have made them possible.
May 18th, 2010 at 8:11 pm
[...] This post was mentioned on Twitter by Russ Noble, The Source. The Source said: CanadaRights.com Banks sell the wealth of the people for profit | Gordon F D Wilson: Canada's big five banks, the … http://bit.ly/9ojUpq [...]